Digging deep: Inside Coal India’s push to reopen abandoned, underground mines

India is keen to hand over abandoned mines to private players. While this can help meet growing domestic coal demand and reduce reliance on imports, it also raises questions about labour conditions, environmental impacts, and India’s coal policy

Desolation and dust permeate the air at the now-abandoned Saunda D Colliery in Bhurkunda, in the Ramgarh district of Jharkhand. An underground mine, it had a capacity of producing nearly a million tonnes (MT) of coal annually. 

On one side, rundown coal trucks and the rusty three-storey high conveyor belt stand beside dilapidated living quarters and the tin-roofed mine shaft, covered by wild shrubs and vines. On the other side, the mine’s project officer, surveyors and a small bank branch still occupy offices.

“Saunda D has been awarded to a private company. We are awaiting final formalities to be completed before the company takes over and begins operations,” R Mundra, Saunda D’s project officer tells CarbonCopy. 

The revival of Saunda D is part of a broader push by the Ministry of Coal to lease out discontinued, underground mines to private companies. As of now, Coal India has identified 34 such mines. The aim is to extract high-quality coal that has so far remained untapped due to financial or technical constraints faced by Coal India Limited (CIL).

“Abandoned mines are being given to private companies on a revenue sharing model. Private players have to do all the work, including getting environment and forest clearances. But they have the right to sell coal, which was earlier only under CIL’s jurisdiction,” says RP Singh, general secretary of the National Coal Organisation Employees Association (NCOEA).

While this approach is expected to help meet growing domestic demand and reduce reliance on imports — which was ₹310,000 crore in FY24 — it raises a set of questions about labour conditions, environmental impacts, and whether India is doubling down on coal at a time its climate commitments call for a phasedown. 

Why were these coalblocks discontinued? 

Currently, Coal India operates a total of 313 mines, which include 131 underground mines, 168 opencast mines, and 14 mixed mines, according to its FY24 annual report. 

In January 2024, it identified 299 discontinued mines to be closed scientifically — filling the mines and shafts with sand, mud and overburden soil, removing coal waste, and returning the excavated land to its original state through afforestation. 

A press release dated 12 January 2024 by the Coal Ministry reads that, “historically, mine closures have been characterised by uncontrolled processes, leaving equipment and materials abandoned and mine sites neglected”.

But in Coal India’s 50-year run, only three mines have been closed in such a manner, according to IndiaSpend.

The rest were either abandoned — where mining activities have ceased permanently — or discontinued — where mining has stopped for financial or technical reasons, with a possibility of reopening in the future. These 34 underground mines going to private companies fall under the second category. These are mines where “good quality coal reserves are lying dormant but may not be financially viable for Coal India Limited (CIL) to mine”, according to a press release issued by the company on 19 June 2024.

The press release also points out multiple advantages of reviving these mines, like “conservation of resource, effective substitution of imported coal, provision of livelihood to the local communities” and even an environmental gain of “no land degradation as the mining infrastructure is already in place.”

About 20 km east from Bhurkunda, the District Commissioner Chandan Kumar offers a simple logic in his office in Ramgarh town. “The mines were discontinued several decades ago due to lack of technology. But [CIL] knew that it would be viable to mine in the future, so they weren’t closed. There is still some coal left in these mines, so they may be reopened,” he says.

If these are not viable for Coal India, why will private firms be successful running these?

Procuring expensive specialised machinery, putting up infrastructure and setting up safety protocols drives up the upfront cost. Also, there’s an added cost in carrying out exploration surveys to assess the state of the discontinued mine, and feasibility of actually mining, according to Lokesh Ray, a senior mining engineer and consultant based in Kolkata.

“The terms of the lease would have to be quite favourable for the private player due to the high capex,” says Rohit Chandra, Professor of Public Policy at IIT Delhi. 

At the same time, however, the mines already exist, and haven’t been sealed. Expenditure on land acquisition, rehabilitation of displaced communities, exploratory digging, overburden removal, and digging of the main shaft of the underground mine will not be needed. And yet, private players are likely to face hurdles in re-opening the mines, according to Ray.

“These mines can contain methane gas, underground fires, and huge amounts of accumulated water. When the water is pumped out, there’s a chance that the mine’s roof might collapse. In other cases, old mine fires may spread. Also, these mines have old infrastructure which is not suitable for modern mining,” says Ray, adding that this will shoot up costs. 

That said, for Coal India and a private company, the upfront costs for reopening an underground mine remains the same. When operations begin, even if one considers that expenditure on machinery is similar, the cost of labour is where the paths begin to diverge.

“Most underground mines in India are unprofitable for a PSU to operate as they are highly labour intensive. There is a high probability of accidents, and even deaths, due to the presence of methane in coal pores, which can ignite. Then, unions protest and production falters,” Sandeep Pai, director for research and strategy, Swaniti Global, tells CarbonCopy.

For such reasons, Coal India’s permanent workers might even prefer working at open cast mines. On the other hand, contract workers are paid daily wages and don’t have much of a choice. Therein lies an incentive for CIL to either use outsourced labour for extracting coal from underground mines, or hand it over to private companies for a cut of the revenue.

For private companies, the scenario is different. “They will engage in more mechanised mining, deploy about one-fifth of the PSU’s labour force. This will make the operation profitable,” says Pai. 

In addition, private companies don’t have the burden of taking care of workers’ welfare like PSUs, and generally don’t allow worker unions, which further lessens costs, he explains.

The resulting savings can be large. “The cost of labour for private companies would be around 20-25% of CIL’s labour cost,” says NCOEA’s Singh. “The minimum monthly wage of a CIL permanent worker is around ₹45,000-₹50,000, while average pay goes up to ₹80,000-₹1,00,000. On top of that, there are benefits, quarterly and yearly bonuses, and medical benefits for families. CIL also invested in setting up colonies for their workers to stay at,” he says.

The private company, however, is not bound by any such strings. “They don’t have to give any benefits or housing to contractual workers, whose monthly wages would be range between ₹12,000-₹22,000. Contractors also take a percentage from the workers’ wages, and in some cases, they have cut a few days’ wages by reducing workers’ attendance. This leads to labour exploitation,” says Singh. 

While these accounts suggest systemic issues in contract labour arrangements, their enforcement and practices may also vary across companies and regions.

Saving on labour costs is how private companies can make profits working these mines, where CIL may struggle. Two other individuals working at CIL, along with another union leader, corroborated Singh’s account, and confirmed that private companies indeed pay less wages to contract workers than what CIL pays its permanent workers.

What are the implications of such outsourcing for Coal India?

Last year, 23 such abandoned mines were awarded to private companies. These mines can potentially produce 34 million tonnes (MT) of coal every year, and have a combined reserve of 635 MT — more than half of India’s annual coal production target of 1.08 billion tonnes for FY25.

All 34 blocks will be leased on a revenue sharing model which has to be at least 4% per tonne sold. Companies that offer the highest revenue to CIL can mine for a maximum of 25 years, and are responsible for all operations and production of dry fuel — removing moisture from the extracted coal to make it more burnable.

The press release says that “the mine operator shall act as the agency responsible for selling coal mined from these mines at market driven price through an auction process”. If sold for the purposes of coal gasification or liquefaction, then the terms change — “in a year, a 50% on contracted percentage of revenue share of the authority will be provided to the operator”.

What does this mean for Coal India? “When the coal from these mines comes into the market, it will replace imports first. Then perhaps, Coal India will lose some percentage of the market. But it will have a revenue stream without putting in much effort,” says Chandra.

This needs to be understood. Right now, a significant part of Coal India’s revenue comes from e-auction, where coal is sold at a premium over market prices, explains Singh. 

During FY24, around 84.4 MT of coal was sold through e-auction at a premium of 72%. Revenue earned through e-auction was ₹ 22,324 crore – nearly 16% of its revenue from sales. In FY23, the premium went as high as 252%, although the quantity of coal sold was 53.4 MT, according to Coal India’s annual reports.

Singh voices his concern, saying, “When private miners start selling high-quality coal at market prices, CIL’s e-auction revenue stream can be hurt. Having less production costs than CIL, they can offer coal at lower prices.” And yet, production from these mines would be just 34 million tonnes per year. Of these sales, too, CIL will get a share. 

In January 2025, the bottom and top grade coking coal were selling at ₹3,085 and ₹18,155 per tonne respectively, according to the Ministry of Coal. If CIL gets 4% revenue from the sale of 34 MT of coal every year, even provisionally estimated at ₹11,000 per tonne, it will earn ₹1,496 crore — or just more than 1% of its FY24 revenue of ₹142,324 crore.

Since 4% is the floor rate, it can be higher. In Saunda D’s case, the rate could potentially go as high as even 22%, according to a union leader and two CIL employees. CarbonCopy could not independently verify this.

“Considering that auctions inviting private companies to take up mines remain under-subscribed and upfront coal auction prices are coming down, this works out for Coal India. For underground mines, there’s even less demand as the upfront cost of capital is quite high,” says Chandra.

Questions mailed to Coal India remain unanswered. The copy will be updated once CarbonCopy receives the responses.

What does it mean for India’s coal emissions?

Such plans of increasing coal production don’t align with India’s enhanced NDC scenario, where coal demand should drop to around 580 MT by 2050 –or with the country’s intensifying problem with climate change.

“Energy security in the future is problematic, and India has to consider all its resources and utilise them efficiently. Coal’s presence in the energy mix isn’t decreasing for the next 10 years, until the economics of climate change kicks in,” says IIT’s Chandra.

He’s referring to the fact that coal-related investments are being increasingly stigmatised globally because of better understanding of the consequences of climate change. “At some point in the next few decades, financing new coal assets will become prohibitively expensive,” he says.

Chandra also adds that all NDC commitments are aspirational, and now with US President Donald Trump’s actions, climate commitments may become less important globally.

For now, this attempt to revive underground mining has to be made more environmentally sound with better contract management, say experts. “Leases or outsourcing contracts should be very specific about the environmental responsibilities of whoever is taking up the contract. PCBs and state environmental regulators should be able to take punitive action against contractors if they are grossly violated,” adds Chandra.

“These underground mines under Coal India’s jurisdiction have good quality coking coal, which is expensive to import. These resources are lying abandoned, while India is unable to meet its huge coal demand domestically. It makes sense to give it to the private sector and monetise the asset,” added Pai.

As the country tries to balance energy needs with climate goals, how these mines are managed — and at what cost — will be critical to watch.

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Shaswata Kundu Chaudhuri

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